X-treme was conceived as a side-scrolling platform game for the Sega Genesis to succeed Sonic & Knuckles (1994). Development shifted to the 32X and then the Saturn and Windows, and the game was redesigned as a 3D platform game for the 1996 holiday season. The plan was disrupted by company politics, an unfavorable visit by Sega of Japan executives, and obstacles using a game engine developed by Sonic Team for another project. Staff illness made it impossible to finish X-treme on time, leading to its cancellation. A film tie-in with Metro-Goldwyn-Mayer was also canceled.

In place of X-treme, Sega released a port of the Genesis game Sonic 3D Blast, but did not release an original 3D Sonic platform game until Sonic Adventure for the Dreamcast in 1998. The cancellation is considered an important factor in the Saturn's commercial failure, as it left the system with no original Sonic platform game. Elements similar to those in X-treme appeared in later games, such as Sonic Lost World (2013).

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"Jade Gully Zone" from Senn and Alon's engine (see Game engines), which used a fish-eye style view known as the "Reflex Lens"

X-treme was a platform game in which players controlled Sonic the Hedgehog, with the ability to move in any direction. Gameplay was similar to the Saturn platform game Bug!, though producer Mike Wallis said that X-treme would differ in that Sonic would be free to roam levels, unconstrained by linear paths.[1] The game featured a fisheye camera system, the "Reflex Lens", that gave players a wide-angle view,[2] making levels appear to move around Sonic.[3] Levels would rotate around a fixed center of gravity, meaning Sonic could run up walls,[4] arriving at what was previously the ceiling. Sonic was also able to enter and exit the screen as he moved.[4] For boss battles, levels were "free-roaming" and "arena-style'",[3] and rendered bosses as polygonal characters as opposed to sprites. These levels used shading, transparency, and lighting effects to showcase the Saturn's technical potential.[5]

The developers wanted to take Sonic into the modern era,[6] while building on the series' successes.[7] In 1996, Wallis said: "We plan to have all of [the familiar Sonic] elements in the game, as well as additional ones. We're giving Sonic new moves, because Sonic is a hedgehog of the times, we're bringing him up to speed."[8] In line with other Sonic games, X-treme emphasized speed and featured collectable rings.[6] Additions included the abilities to throw rings at enemies, create a shield from rings, do spinning midair attacks,[6] strike enemies below with a "Power Ball" attack, jump higher with less control than normal, and execute a "Sonic Boom" attack, in concert with the shield, that struck in 360 degrees.[4]Surfing and bungee jumping were included as activities considered cool at the time.[6]

At least four stages were developed: Jade Gully, Red Sands, Galaxy Fortress,[4] and Crystal Frost.[1] Lead designer Chris Senn stated that he modeled and textured four main characters, as well as designs for 50 enemies and an hour of music.[6]Fang the Sniper and Metal Sonic were planned as bosses.[5] The plot described in promotional materials involves a Tiara Boobowski, who was set to become a major character,[6] and her father calling on Sonic to help defend the six magical Rings of Order from Dr. Robotnik.[1][7]

In 1991, STI began developing several games, including Sonic the Hedgehog 2, which was released the following year. Though Sonic the Hedgehog 2 was successful, the language barrier and cultural differences created a rift between the Japanese and American developers. Once development ended, Cerny departed STI and was replaced by former Atari employee Roger Hector. The American staff developed Sonic Spinball, while the Japanese staff developed Sonic the Hedgehog 3 and Sonic & Knuckles.[11] According to developer Takashi Iizuka, the Japanese team experimented with 3D computer graphics for Sonic 3, but were unable to implement them with the limited power of the Genesis.[12] After Sonic & Knuckles was completed in 1994, Naka returned to Japan to continue work with Sonic Team.[10]

At the time, Sega of Japan and Sega of America ran as separate entities, and relations were not always smooth.[3] Some of this conflict may have been caused by Sega president Hayao Nakayama and his admiration for Sega of America; according to former Sega of America CEO Tom Kalinske, "There were some guys in the executive suites who really didn't like that Nakayama in particular appeared to favor the US executives. A lot of the Japanese executives were maybe a little jealous, and I think some of that played into the decisions that were made."[13] By contrast, author Steven L. Kent wrote that Nakayama bullied American executives and believed the Japanese executives made the best decisions.[14] According to Hector, after the release of the Sony PlayStation in 1994, the atmosphere at Sega became political, with "lots of finger-pointing".[15]

After Naka's return to Japan with his team in late 1994, STI was left with mostly American staff.[15] Early ideas for the next Sonic game included the experimental Sonic Crackers, which became Knuckles' Chaotix for the 32X.[2] Development of Sonic X-treme began in late 1994 at STI.[6] Michael Kosaka was executive producer and team leader, and designer and CGI artist Senn created animations to pitch the game to Sega executives.[3]Sonic X-treme was conceived for the Sega Genesis as a side-scrolling platform game like previous Sonic games.[2] As new consoles and the 32-bit era were on the way, the game was moved to the 32X under the working titles Sonic 32X[6] and Sonic Mars[2] after the "Project Mars" codename used for the 32X.[16] The initial 32X design was for an isometric side-scroller, but became a full 3D game with a view set on a floating plane.[2] Kosaka completed design documents for the 32X version before the 32X was released, without a clear picture of the hardware.[2]

In mid-1995, Kosaka resigned.[6] According to Senn, "[Kosaka] and the executive producer Dean Lester were not getting along, and I believe Michael felt it was his best option to simply remove himself from what he thought was a politically unhealthy environment."[3] Lester resigned later in 1995 and was replaced by Manny Granillo. Wallis, who had worked on the Genesis games The Ooze and Comix Zone, was promoted to producer and placed in charge of Sonic X-treme.[17] Lead programmer Don Goddard was replaced with Ofer Alon, who some staff felt was difficult to work with, saying he did not share his work.[7] As the design had changed significantly and the 32X struggled commercially, development moved to a planned Sega cartridge console to be powered by nVidia 3D hardware, to compete with the upcoming Nintendo 64.[2] Wallis said this request was made without hardware specifications.[17] After Sega of Japan announced that Sega would focus solely on the Sega Saturn, development shifted again.[3] When Naka visited STI and observed the X-treme development, he simply said "good luck".[2][3]

Screenshot from Coffin's "boss engine", one of two engines used to develop Sonic X-treme. This version was displayed at E3 in May 1996.

The Saturn version was developed by two teams with two different game engines, starting in the second half of 1995. One team, led by STI tech director Robert Morgan and including programmer Chris Coffin, developed the free-roaming boss levels.[7] This engine used tools used by Saturn games such as Panzer Dragoon II Zwei and rendered bosses as fully polygonal characters.[5] The other team, led by Senn and Alon, developed the main levels, working on PC with the intent of porting their work to Saturn.[7] Alon and Senn focused on building an editor to construct the main levels. Music and backgrounds could not be coded in the editor, and had to be coded manually for each level. Enemies were created as pre-rendered sprites.[5]

Other staff included composer Howard Drossin, lead artist Ross Harris, artist/designers Fei Cheng and Andrew Probert, and designers Jason Kuo and Richard Wheeler.[1] According to Senn, his team was completely different from the STI teams led by Naka; this, combined with their inexperience, "set up seeds of doubt and a political landmine waiting to go off if we didn't produce amazing results quickly."[7] Wallis stated that STI shifted its resources toward Sonic X-treme in late 1995. He expressed frustration with the team structure, and felt that internal politics hampered development.[17] Coffin felt the division of responsibilities would ensure every element was perfect.[5]

"We had artists doing art for levels that hadn't even been concepted out. We had programmers waiting and waiting and waiting until every minute detail had been concepted out, and we had designers doing whatever the hell they wanted. It was a mess and because of the internal politics (the art director had trained his art team to hate the designers and programmers), it was even more difficult to get any work done."

Other difficulties arose from the design. According to Wallis, "The theme of the game was to take basic Sonic [2D side-scrolling] and add the ability to have him go into and out of the screen. On paper that sounded great, but when we actually started to implement it, the addition created some design challenges we didn't initially account for."[7]3D graphics were new, and developers were still learning how they would affect controls and gameplay.[7] Programming for the Saturn proved difficult; as Alon could not get his engine, developed on Windows, to run fast enough on Saturn, Morgan outsourced the port to a third party.[17]

In March 1996, Sega of Japan representatives visited STI to evaluate progress. Senn and other sources indicate that the key visitor was president Nakayama,[2][3][7] though Wallis recalls executive vice president Shoichiro Irimajiri.[17] The executive was unimpressed by Senn and Alon's work, as the version he saw, ported from PC to Saturn by the third party, ran at a poor frame rate.[2] Senn and Alon attempted to show their most recent PC version, but the visitor left before they had the opportunity. Although neither Senn nor Alon were officially part of the production after the visit, they continued working on their version, hoping to pitch it to Sega as a PC game.[2][3][7]

The visitor was impressed by Coffin's boss engine,[3] and requested that X-treme be reworked around it.[7] Concerned about the need to create essentially a new game before the strict December 1996 deadline, Wallis isolated Coffin's team, preventing outside influence.[3] The team consisted of four artists, two programmers, a contractor, and three designers, set up in an old STI location.[17] They worked between sixteen and twenty hours a day.[2] According to Wallis, "Coffin actually left his apartment, cancelling his lease, moved all his belongings into the office, and worked day and night."[7]

"It was about as bad as I've seen. The politics that led to Kosaka-san's departure. Allowing a newbie wannabe designer like me to fill a veteran like Michael Kosaka's shoes without guidance and direction. Going through three lead programmers in the first year and a half of production, each time restarting the technology. A divide between people's ideas about what the game should be. Egos. Inexperience. Poor communication, bad politics… all of these things contributed to the inevitable demise of the project."

In April, Sega executive vice president Bernie Stolar approached STI and asked what he could do to help the game meet its deadline. At Wallis' suggestion, he provided the tools and source code for Sonic Team's 3D Saturn game Nights into Dreams. Two weeks later, Stolar requested that the team stop using the engine, as Naka had threatened to leave Sega if it were used. Senn said: "Personally, I can understand Naka's interest in keeping technology his team developed under tight control. Sonic was a franchise he clearly felt should be handled solely by Sonic Team... He must have felt very strongly about it if he was willing to even threaten to quit."[6] Sonic Team was also developing its own 3D Sonic game using the Nights engine, which may have motivated Naka's threat.[18] The loss of the Nights engine cost the Sonic X-treme team two weeks of development.[2][17]

In May 1996, Sega displayed a playable demo of X-treme at E3 1996,[19] and displayed a version of Coffin's engine.[2] By this time, team morale had dropped and turnover was high.[3] Wallis claims that he fired an artist for not pulling his weight and for disrupting the team.[17] By August, Coffin had contracted severe pneumonia. Wallis praised Coffin's effort, calling him a "human dynamo",[2][17] but said that Coffin had "worked himself into the ground" and that the team had no chance of meeting its deadline without him. Around the same time, Senn became so ill that he was told he had six months to live, though he survived. With both teams crippled, and only two months left before the deadline, Wallis canceled the game.[2][6]

Sega initially stated that X-treme had been delayed,[20] but in early 1997 announced that it had been canceled.[7] For the 1996 holiday season, Sega instead concentrated on Sonic Team's Nights into Dreams, and a port of the Genesis game Sonic 3D Blast by Traveller's Tales, which Wallis contributed to.[3] STI developer Peter Morawiec requested that X-treme be reworked into bonus stages in 3D Blast, but Traveller's Tales was unable to properly transfer Sonic's model.[21] Sonic Team's work on a Saturn 3D Sonic game became Sonic Adventure for the Dreamcast. Remnants of their prototype can be seen in the Saturn compilation game Sonic Jam.[22][23]

While Senn felt the version he and Alon were developing could have been completed with an additional six to twelve months,[6] Sega's PC division would not pay for its development, and may have been hesitant to do so after the engine had been rejected for X-treme.[2] After the project was rejected, Alon left Sega.[3] Sega of America disbanded STI in 1996 following management changes. STI's Roger Hector believed that the success of PlayStation led to corporate turmoil within Sega that resulted in STI's dissolution.[11] According to Wallis, STI was restructured as Sega of America's product development department after the previous product development department had become SegaSoft.[15]

In August 1994, Sega of America signed a deal with Metro-Goldwyn-Mayer and Trilogy Entertainment to produce a live-action animated film based on Sonic the Hedgehog and tie into Sonic X-treme. In May 1995, screenwriter Richard Jeffries pitched a treatment to Sega titled Sonic the Hedgehog: Wonders of the World. The treatment saw Sonic and Dr Robotnik escaping from Sonic X-treme into the real world. The film was canceled as none of the companies could come to an agreement.[24]

With X-treme's cancellation, the Sega Saturn had no original Sonic the Hedgehog platform game

Sonic X-treme's cancellation is cited as a key reason the Saturn failed.[16][25][26] While Sega claimed up to 55% of the console market in 1994,[27] by August 1997, Sony controlled 47%, Nintendo 40%, and Sega only 12%. Neither price cuts nor high-profile game releases could save the console.[28] The Saturn never received an exclusive Sonic platform game;[29] instead it received a port of the Genesis game Sonic 3D Blast; as well as Sonic Jam, a compilation of past Sonic games featuring a 3D level.[2]

Journalists and fans have speculated about the impact X-treme might have had had it been released. David Houghton of GamesRadar+ described the prospect of "a good 3D Sonic game" on the Saturn as "a 'What if...' situation on a par with the dinosaurs not becoming extinct."[3]IGN's Travis Fahs described X-treme as "an empty vessel for Sega's ambitions and the hopes of their fans ... It was the turning point not only for Sega's mascot and their 32-bit console, but for the entire company."[2] Levi Buchanan, also writing for IGN, stated that "while the lack of a true Sonic sequel for the Saturn certainly didn't wholly destroy the console's chances, the lack of appearances by the Sega mascot sure didn't help matters much."[25] Dave Zdyrko, who operated a prominent Saturn fan site, said: "I don't know if [X-treme] could've saved the Saturn, but ... Sonic helped make the Genesis and it made absolutely no sense why there wasn't a great new Sonic title ready at or near the launch of the [Saturn]".[29]

In a 2007 retrospective, producer Wallis said that X-treme "definitely would have been competitive" with Nintendo's Super Mario 64.[7] Senn believed that a version of X-treme built by him with Alon's engine could have sold well.[6] By contrast, Next Generation said that X-treme did not compare well to competition such as Super Mario 64 and Crash Bandicoot, and would have damaged Sega's reputation.[30] Naka was also dissatisfied with the game; in a 2012 interview, he recalled being relieved when he learned it had been cancelled.[23] Journalists also noted similarities in level themes and mechanics between X-treme and the 2013 game Sonic Lost World.[31]

For years, little content from X-treme was released beyond promotional screenshots. In 2006, a copy of an early test engine was sold at auction for US$2500 to an anonymous collector.[6][32] An animated GIF image of gameplay was released, and after a fundraising project by the "Assemblergames" website community purchased the disc from the collector, the disk image was leaked on July 17, 2007.[33] Senn opened the "Sonic X-treme Compendium" website and revealed large amounts of development history, including early footage, a playable character named Tiara, and concept music. Senn considered finishing X-treme himself, and used some of its concepts in a Sonic fan game.[3] In February 2015, fans obtained the Sonic X-treme source code and created a playable build.[34]